Smart Homes 101

by
Bridget McCrea
| Jul 29, 2016

How to use a listing’s smart home status to your advantage without creating privacy issues in the process.

By definition, these residences incorporate appliances, lighting, heating, air conditioning, TVs, computers, entertainment audio/video systems, security, and/or camera systems that communicate with one another. In most cases, these systems can be controlled remotely by a time schedule, and from any room in the home, as well as remotely from any location in the world by phone or Internet.

According to SmartHomeUSA, installation of smart products gives the home and its occupants various benefits—the same benefits that technology and personal computing have provided over the past 30 years—convenience and savings of time, money, and energy.

These conveniences put new opportunities and challenges in front of REALTORS® representing the sellers of smart homes. On one hand, there are clear advantages to listing, showing, and selling properties that come with all of the latest bells and whistles. On the other hand, these homes can present numerous challenges for the brokers that are listing them.

“Although we enjoy the benefits of a connected lifestyle, we must not lose sight of the risks a smart home may pose to our privacy and physical safety,” says Craig Spiezle, president and executive director of the Online Trust Alliance, in REALTOR® Magazine’s Offer Your Clients a Smart-Home Checklist. “As evidenced by some privacy practices and recent vulnerabilities with smart cars, TVs, and baby monitors, consumers need to be aware of and manage smart devices in their homes.”v

Taking Control

With products like locks, light bulbs, appliances, and thermostats able to be controlled via smartphone or tablet, an estimated 100 million households worldwide had some type of smart home device by the end of 2015, according to Deutsche Telekom, a German telecommunications company. And that number is expected to grow to 300 million over the next decade.

“Salespeople who are unfamiliar with this $967 million industry, risk underestimating a home’s value when it comes to efficiency, security, and convenience,” writes Melissa Dittmann Tracey in REALTOR® Magazine’s Are Your Agents Ready to Sell Smart Homes? “What’s more, real estate companies are encountering issues of security and privacy when a smart home is sold to a new owner.”

Chad Curry, managing director at the Center for REALTOR® Technology/CRTLabs in Chicago, says the organization has been closely examining both the challenges and the positives associated with smart homes. For starters, he says agents should think about the basic definition of a “smart home” before using the term to market and advertise their listings.

“Just because a home has a [remote-controlled] thermostat or a lock doesn’t necessarily make it a smart home,” Curry points out. “You need more than one device for a property to truly fit into this category.” In most cases, he says having two or more devices (e.g., a thermostat that reduces energy usage and a smart lock) does constitute a smart home.

When smart cameras come into play, the situation becomes more complex for REALTORS® who are listing and selling the homes. “If the home has a camera or even a thermostat that will remain with the property after the sale, those devices need to be reset before the new owner moves in,” Curry advises. “Otherwise, the previous occupant can still have access to these smart home components.”

Another issue REALTORS® need to think about when selling smart homes is the very fact that these homes are, well, more intelligent than the average property. A camera system that allows owners to “listen in” and witness showing appointments—and the associated negotiations and discussions—can quickly become an invasion of privacy. Curry says the problem can usually be solved through open communications with the sellers.

Washington REALTORS® Legal Hotline Lawyer Annie Fitzsimmons explains that Washington State Law makes it unlawful to intercept a conversation by audio recording device without written permission. It is not enough to post signage around the house or have an oral conversation to notify potential buyers that there is audio surveillance on the property. Two-party consent is required and gaining buyer’s consent to be recorded during a showing is unlikely. Listing Brokers should talk to sellers about disabling that feature before opening the house to buyers. Listing brokers are not obligated to explain the law to their clients in this respect, but should advise them to seek legal counsel if they chose to not disable audio recording devices.

From the buyer’s broker perspective, they should always assume that there is an audio recording device in every home. It might be unlawful for sellers to intercept conversations, but it’s unlikely that the buyer’s broker or the buyer will ever know about it. Broker should advise their buyers to look around the house, make note of the things they want to discuss, and save the conversation for after leaving the sellers home.

Is it Worth the Trouble?

Because smart home technology is fairly new, its effect on home prices is just beginning to be evaluated. According to a 2016 Coldwell Banker Smart Home Survey, homeowners are willing to invest fairly significantly in smart home technology. Coldwell Banker reports that 72 percent of millennial homeowners say they would spend $1,500 or more to make their home smart; 44 percent of them say they would pay $3,000 or more to do so. Who might be willing to pay more for a home with smart technology? Parents with children, for one; 59 percent of them told Coldwell Banker they would pay more for a smart home.

With no end in sight to the amount of smart home technology being integrated into residences, the best defense against potential problems is a good offense. Start by asking if your sellers have any smart devices in their home and then ask them to make a list (if there’s more than one). Figure out which ones will stay with the home (thermostats) and which are not included in the sale (entertainment hubs), and then come up with a two-pronged plan: One for marketing the home, and the other for ensuring that no privacy lines are crossed during showings. “Being able to say ‘this home comes with a Nest thermostat,’ for example,” says Curry, “could help make the home more marketable.”

Bridget McCrea is a freelance writer who has been covering real estate, technology, and education since 1996. She can be reached at bridgetmccrea@gmail.com.